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Mobile LBS blowing up but monetization is a challenge: CTIA panel

March 25, 2010

By Dan Butcher, Mobile Commerce Daily

LAS VEGAS – Mobile location-based services in the U.S. have gained significant momentum over the past couple of years, and are being widely adopted by consumers and enterprises while wireless data usage has undergone significant transformation.

Many successful applications are reliant upon location information, and the panel “Applications – Location Enabled Future,” moderated by Gaurav Garg, partner at Sequoia Capital, discussed what types of location-enabled applications and content are being monetized. The discussion covered what the industry challenges are, and what may be in store for the future.

“I’m here to tell you this is the year of LBS, the start of the decade of LBS, with all of these location-based apps coming out for all of these devices,” said Rip Gerber, president/CEO of Loc-Aid Technologies. “What has started to push our ecosystem forward fast is Apple and Google.

“Canadian carriers have opened up location APIs, but in the U.S. it has been slower—Sprint went first, and the others are coming this year” he said. “What woke them up was Google and Apple eating their lunch—there are now 50 apps store you can go to, and carriers used to own that a few years ago.

“There are bigger forces at play, so we had to figure out how to swim with those new currents to create value.”
There was a battle on the battle about pricing models and applications versus personal navigation devices.

“Our bet was that people didn’t want to carry multiple devices, and an app is available on the device you have in your purse or your pocket,” said Doug Antone, senior vice president of navigation and telematics at TeleCommunication Systems Inc. “There’s no question right now that Garmin and TomTom and the standalone PND market are under attack—there are a lot of companies going to that space with the belief that consumers don’t want to carry multiple devices.

“It’s all about the business model—it’s all about the pricing and accessibility of these applications,” he said. “Consumers will pay for additional content but not $10 a month, maybe 50 cents here, a dollar there.”

Location-based services are all about immediacy and relevancy. If they provide a value-add to consumers, there are ways to monetize them.

“People that will win in the location space are people that immerse you in the world around you with specific content within feet of you,” said Eric Blumberg, cofounder/president of Smarter Agent. “Consumers want free applications, so we have to figure out a way to give it to them.

“How do you monetize via advertising in a way that doesn’t take away from the user experience?” he said. “These are active users, so the monetization comes from giving good content, get them using it and monetize it in a way that doesn’t ruin their usage.”

“Google is intent on absolute value destruction throughout the ecosystem—they’ve figured out how to make money by people surfing the Internet no matter what, they’re deadly focused on mobile, they’ve got a strategy and it’s working,” said Walter Doyle, president/CEO of uLocate Communications/Where.com.

“You incentivize users to take certain actions using location,” he said. “If you can get a GPS fix on someone and you’re walking them into a store, you’re going to be able to make some money.

“It’s important to figure out how to monetize a free-to-consumer mobile service, and people are figuring out how to monetize—there is a $14 billion annual business around local search that is about connecting a local audience with local retailers, and the mobile phone will turn this business on its head.”

There is a wide range from high-priced in-car personal navigation devices to free smartphone applications. Finding a price point or deciding on a free, ad-supported model can be a tricky propostion.

“Users have long expected that it is free, but there is a high end to that market, distinctly different applications for sectors such as automotive and government,” said Patrick McDevitt, vice president of community mapping at Tele Atlas, a subsidiary of TomTom. “PNDs are not necessarily cannibalizing smartphone apps.”